MONEY LAUNDERING

The term 'money laundering' is typically used to refer to any financial transaction that was meant to be kept secret, but was eventually found out. In many cases it refers to the process of concealing a source of money, which is often earned by illegal means such as drug trafficking, health care fraud, and smuggling, just to name a few. Various laundering techniques can be used by individuals, groups, officials, and corporations. The goal of a money laundering operation is usually to hide either the source or the destination of money; in many cases it aims to make illegal transactions appear legitimate and legal. How Money is Laundered? The money laundering process usually involves several steps that make it difficult to trace the original source of money. Some of these steps include transferring the money between bank accounts, breaking up large amounts of money into small deposits, or buying acceptable forms of money such as money orders or cashier's checks. The process is usually planned and organized to avoid being caught and facing punishment. Perhaps the best way to understand the concept is to take a look at some common techniques. Suppose, for example, that an employee was stealing large sums of cash from her employer without getting caught. If she was to make large deposits into her bank account, some regulator (or computer program) might notice the unusually large deposits, thereby increasing her chance of getting caught. Instead, the criminal might launder the money by simply using the cash to make purchases and then reselling the items in a legitimate market. The money gained from these sales is 'cleaner' and the criminal is drawing less attention to herself. Quite often, criminals will use the Internet as a tool to launder money. One group of people that are often victimized in the process are job seekers, quite often from Australia. These job seekers will unknowingly apply for fraudulent jobs that require them to give their bank information to the criminal, as the position requires them to transfer money and process payments. In many cases, people who think they were hired for a new job were actually part of a money laundering scheme. Another common scheme to launder money involves hiring employees to package and ship stolen items, most of which are electronics. The employee is reimbursed for the shipping charges and paid with a fake check. The criminal is usually selling the electronics, most likely to people in foreign countries, in order to launder their money without being caught. The transaction looks legal because it appears to be nothing more than a buy and sell situation, when in reality, it is part of a bigger laundering scheme. Possible Consequences Actual money laundering operations are often complex and include multiple transactions; needless to say, the practice is illegal and can result in large penalties, fines, or imprisonment for the person or people involved. Another consequence of money laundering is the effect it can have on society: when money laundering rates are high, criminal activity can increase because the source of the money is usually earned through illegal activities. The economy can also be affected when large amounts of money is tied up in the laundering process

Money laundering happens in almost every country in the world, and a single scheme typically involves transferring money through several countries in order to obscure its origins. In this article, we'll learn exactly what money laundering is and why it's necessary, who launders money and how they do it and what steps the authorities are taking to try to foil moneylaundering operations. Money laundering, at its simplest, is the act of making money that comes from Source A look like it comes from Source B. In practice, criminals are trying to disguise the origins of money obtained through illegal activities so it looks like it was obtained from legal sources. Otherwise, they can't use the money because it would connect them to the criminal activity, and lawenforcement officials would seBut in simple terms it is the Conversion of Black money into white money. This takes you back to cleaning the huge piles of cash. Indian newspapers frequently report the money laundering scams perpetrated by the Political leaders and some of the prominent stars are the chief ministers of UP, Punjab and Kerala. UP chief minister ms. Mayawati as per the Indian Express reports used some innovative techniques to launder the money by avoiding the tax in legitimate manner. She accepted the donations from persons who were road side heroes. When CBI raided these guys were found in no position to donate huge sums for political motives. Other Indian star in the laundering Business is Ketan Parekh.It is believed that he shifted the proceeds of money received from the BoI pay order scam to various tax heavens and ultimately in the Swiss Banks.These transactions are believd to be just the tip of the iceberg. If done successfully, it allows the criminals to maintain control over their proceeds and ultimately to provide a legitimate cover for their source of income. Money laundering plays a fundamental role in facilitating the ambitions of the drug trafficker, the terrorist, the organised criminal, the insider dealer, the tax evader as well as the many others who need to avoid the kind of attention from the authorities that sudden wealth brings from illegal activities. By engaging in this type of activity it is hoped to place the proceeds beyond the reach of any asset forfeiture laws. The stages of the process i) Placement This is the first stage in the washing cycle. Money laundering is a "cash-intensive" business, generating vast amounts of cash from illegal activities (for example, street dealing of drugs where payment takes the form of cash in small denominations). The monies are placed into the financial system or retail economy or are smuggled out of the country. The aims of the launderer are to remove the cash from the location of acquisition so as to avoid detection from the authorities and to then transform it into other asset forms; for example: travellers cheques, postal orders, etc. (more details follow). ii)Layering In the course of layering, there is the first attempt at concealment or disguise of the source of the ownership of the funds by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity. The purpose of layering is to disassociate the illegal monies from the source of the crime by purposely creating a complex web of financial transactions aimed at concealing any audit trail as well as the source and ownership of funds.

Typically, layers are created by moving monies in and out of the offshore bank accounts of bearer share shell companies through electronic funds' transfer (EFT). Given that there are over 500,000 wire transfers - representing in excess of $1 trillion - electronically circling the globe daily, most of which is legitimate, there isnt enough information disclosed on any single wire transfer to know how clean or dirty the money is, therefore providing an excellent way for launderers to move their dirty money. Other forms used by launderers are complex dealings with stock, commodity and futures brokers. Given the sheer volume of daily transactions, and the high degree of anonymity available, the chances of transactions being traced is insignificant. iii)Integration The final stage in the process. It is this stage at which the money is integrated into the legitimate economic and financial system and is assimilated with all other assets in the system. Integration of the "cleaned" money into the economy is accomplished by the launderer making it appear to have been legally earned. By this stage, it is exceedingly difficult to distinguish legal and illegal wealth. Questions 1) Define Money Laundering? 2) What are the steps in money Laundering? 3) What are the possible consequences of Money Laundering?

Source Compiled By Silvia Rose

: www.wikipedia.org